Ryan Law Firm Triumphant in Sales Tax Case Regarding the Taxability of Loan Package Services Sold to a Law Firm
June 8, 2020
On May 2, 2020, Ryan Law Firm, PLLC obtained a favorable ruling from the Travis County District Court in Black, Mann & Graham, L.L.P. (“BMG”) v. Hegar. The ruling resulted from a bench trial litigated by Ryan Law attorneys Doug Sigel and Rich Moore.
The issue in the case was the taxability of loan package services purchased by BMG for use in legal services provided to BMG’s clients. BMG outsourced loan package creation, akin to paralegal work, performed to facilitate the firm’s performance of legal services.
“As a result, BMG is entitled to a refund of all sales tax paid in purchasing the loan package services.
The case turned on the proper interpretation of Texas Comptroller Rule 3.330 regarding data processing services, specific exclusions for professional services, and an essence of the transaction analysis. In determining that the loan package services were not data processing services, the district court agreed with BMG’s position—the services were in fact professional services, thus requiring compliance expertise independent of any computer use and that BMG’s purpose for purchasing the services was to receive a compliant loan package. As a result, BMG is entitled to a refund of all sales tax paid in purchasing the loan package services.
For more information, please contact:
Practice Group Leader, Sales & Use and Income Tax
Associate, Sales & Use and Income Tax